Power: a long-term vi­sion

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An in­fras­truc­tural com­mod­ity, power re­quires a rather long-term vi­sion for proper man­age­ment based on both eco­nom­ics and de­mand/sup­ply profiles.

Short-term mea­sures to plug power short­ages will al­ways tend to be ex­pen­sive and con­sti­tute an un­due charge on the na­tional trea­sury and econ­omy.

In this con­text, this ar­ti­cle looks at im­pli­ca­tions of the Nu­clear En­ergy Vi­sion 2050 and sug­gests some pol­icy im­per­a­tives, while ap­pre­ci­at­ing the vi­sion as a step in the right di­rec­tion whereby Pak­istan plans to gen­er­ate 40,000MW of elec­tric­ity to in­crease the share of nu­clear-based elec­tric­ity to ap­prox­i­mately 25pc in the elec­tric­ity mix from the cur­rent 4.3pc. In­ter­est­ingly, In­dia is also pur­su­ing the same tar­get of 25pc nu­clear-based elec­tric­ity by 2050.

In­ter­na­tion­ally, the cur­rent share of nu­clear en­ergy is quite sig­nif­i­cant in the over­all mix pri­mar­ily due to its en­ergy con­tent and cost ad­van­tages. More­over, nu­clear en­ergy is ar­guably a green and sus­tain­able en­ergy source as it en­tails zero CO2 emissions dur­ing elec­tric­ity gen­er­a­tion process and does not lead to cli­mate change and green­house ef­fects though op­er­a­tional safety and reg­u­la­tion are of para­mount im­por­tance.

Pak­istan Atomic En­ergy Com­mis­sion’s (PAEC) tar­gets of five re­ac­tors of 1,100MW each by 2030 and fur­ther 32 re­ac­tors of 1,100MW each by 2050 need care­ful eval­u­a­tion in a broader per­spec­tive, given the con­straints placed on Pak­istan by the in­ter­na­tional nu­clear es­tab­lish­ment, over­all na­tional eco­nomic re­sources and lim­ited ura­nium sup­plies.

Since Pak­istan is a non-sig­na­tory

to the Treaty on Non-Pro­lif­er­a­tion of Nu­clear Weapons (NPT) and the Nu­clear Sup­pli­ers Group (NSG) for­bids nu­clear trade with non-NPT sig­na­to­ries, there­fore, Pak­istan should base its busi­ness case for its ‘nu­clear vi­sion’ on zero sup­port from any of the tra­di­tional trade part­ners for nu­clear mat­ters.

It would be quite un­re­al­is­tic to as­sume any­thing on the con­trary, ir­re­spec­tive of the waivers granted to In­dia, an­other non-NPT sig­na­tory, by IAEA pur­suant to the In­dia-US Civil Nu­clear Agree­ment.

There­fore, based on cur­rent nu­clear co­op­er­a­tion, the only trade part­ner that Pak­istan can rely on for suc­cess of its nu­clear vi­sion is China. A mem­ber of the NSG, China main­tains that its co­op­er­a­tion with Pak­istan was ‘grand­fa­thered’ be­fore China be­came an NSG mem­ber and thus con­tin­ues to sup­port the nu­clear sec­tor in Pak­istan.

The Chi­nese nu­clear ca­pa­bil­ity is pro­gress­ing rapidly. It is a sig­nif­i­cant sup­plier hav­ing its own nu­clear re­ac­tors now avail­able for ex­port. Gen­er­a­tion-3 models such as ACPR1000 and the Hua­long 1 (HPR1000) now of­fer dou­ble con­tain­ment and pro­vide im­proved seis­mic ca­pa­bil­ity and ther­mal mar­gins sub­se­quent to Fukushima.

How­ever, given the long-term and sub­stan­tial busi­ness re­la­tion­ship that we will have to em­bark on with China to de­velop 40,000MW of gen­er­a­tion ca­pac­ity, it would make sense to fully utilise this op­por­tu­nity and take this re­la­tion­ship be­yond a trans­ac­tional ar­range­ment.

To en­sure that the vi­sion turns into a re­al­ity, Pak­istan should strive to de­velop this re­la­tion­ship in a way that it is able to ar­range for nu­clear re­ac­tor’s de­vel­op­ment tech­nol­ogy trans­fer, whereby, our en­gi­neers and com­pa­nies pro­gres­sively ac­quire re­ac­tor de­vel­op­ment tech­nol­ogy ei­ther through a di­rect tech­nol­ogy trans­fer or through co­op­er­a­tion, and ini­ti­ate work on de­vel­op­ing a ro­bust lo­cal sup­ply chain. Cross in­dus­try learn­ing can guide us in this re­gard as prece­dence for such close and suc­cess­ful co­op­er­a­tion ex­ists in the form of JF-17 fighter de­vel­op­ment.

How­ever, sus­tained suc­cess of such an ini­tia­tive will per­haps re­quire sig­nif­i­cant re­struc­tur­ing of the nu­cle­ar­based power con­struct in the coun­try while paving the way for in­volve­ment and de­vel­op­ment of dif­fer­ent par­a­digms based on both com­mer­cial and tech­no­log­i­cal in­no­va­tion.

This should, in any case, be at­tempted to en­sure de­vel­op­ment of an in­dige­nous and in­ter­na­tion­ally com­pet­i­tive nu­clear power value chain.

The sec­ond as­pect that is es­sen­tial for the suc­cess of the nu­clear vi­sion is the timely avail­abil­ity of ad­e­quate fi­nan­cial re­sources. Nu­clear power plants are cap­i­tal-in­ten­sive projects and a typ­i­cal plant in the West can cost any­where be­tween $6-10bn. How­ever, costs are much cheaper in Asia and can vary based on lo­ca­tion of plant.

The av­er­age overnight cost of nu­clear plant in China is said to be around $3,500/kW, im­ply­ing that a 1,000MW nu­clear plant would en­tail an ap­prox­i­mate cap­i­tal ex­pen­di­ture of $3.5bn ex­clud­ing fi­nanc­ing cost and project cost es­ca­la­tions.

If Pak­istan is con­sid­er­ing set­ting up 37 ad­di­tional plants by 2050, the to­tal cap­i­tal ex­pen­di­ture that we are look­ing at would be in ex­cess of $130bn ex­clud­ing fi­nanc­ing costs and in­fla­tion. Fi­nanc­ing op­tions and time­lines for these plants, there­fore, will have to be con­sid­ered care­fully.

With lim­ited eco­nomic re­sources at its dis­posal and in­creas­ing lo­cal de­mands com­bined with NSG em­bargo, Pak­istan will un­for­tu­nately have no choice but to fall back on Chi­nese fi­nan­cial sup­port to back up the nu­clear vi­sion.

The Chi­nese re­sponse to fi­nan­cial as­sis­tance will be tem­pered by their own eco­nomic sit­u­a­tion go­ing into the next decade with sig­nif­i­cant signs of slow­down al­ready emerg­ing within its econ­omy.

In the ab­sence of in­ter­na­tional fund­ing ar­range­ments for de­vel­op­ment of nu­clear fa­cil­i­ties, one can­not see the vi­sion gain­ing much trac­tion with­out, per­haps, the in­cre­men­tal par­tic­i­pa­tion of pri­vate sec­tor into the nu­clear en­ergy sec­tor on the pat­tern, which is fol­lowed by de­vel­oped economies.

This could po­ten­tially be a gamechanger for the na­tional econ­omy, sup­ple­mented by the de­vel­op­ment of lo­cal sup­ply chain and could con­trib­ute to de­vel­op­ment of a to­tally new in­dus­trial sec­tor, lead­ing to sig­nif­i­cant em­ploy­ment and in­vest­ment growth.

Though nu­clear power is very com­pet­i­tive with other forms of en­ergy, pro­vid­ing a very sta­ble and ef­fi­cient source of elec­tric­ity, tak­ing into ac­count ex­ter­nal­i­ties as­so­ci­ated with fos­sil fuels such as CO2 emissions and en­vi­ron­men­tal costs, nu­clear power turns out to be very cheap source of en­ergy only next to hy­dropower.

As per PAEC web­site, the av­er­age cost of nu­clear elec­tric­ity from Chashma 1 and 2 for 2013 was Rs6.35/kWh sig­nif­i­cantly lower than IPPs and Gencos.

There­fore, it is im­per­a­tive that we work on this strat­egy of tech­nol­ogy trans­fer and in­cre­men­tal pri­vate sec­tor par­tic­i­pa­tion to en­sure that the nu­clear vi­sion gains trac­tion, the com­mon per­son starts ben­e­fit­ting from this low cost source of elec­tric­ity and Pak­istan de­vel­ops a new in­dus­trial ver­ti­cal, which emerges as a low-cost al­ter­na­tive to West-ori­ented Nu­clear Sup­pli­ers Group mem­bers.

In­ter­na­tional opin­ion, how­ever, stays di­vided as we see coun­tries moth­balling nu­clear plants, such as Ger­many and then we have coun­tries mov­ing ahead with all com­mer­cial force and power, such as China and In­dia. Pak­istan be­longs to the lat­ter’s cat­e­gory.

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